In a statement issued on Thursday, the Government said companies "likely to be subject to extrajudicial directions from a foreign government that conflict with Australian law" would likely be unable to participate in the next generation network.

On Friday, Huawei — who said it will not comment further on the matter this week — criticised the decision in a statement provided to the ABC as "politically motivated" while noting that it intends to "protect [its] legal rights".

"The Australian Government's actions undermine the principles of competition and non-discrimination in fair trade," it said.

"We will continue to engage with the Australian Government, and in accordance with Australian law and relevant international conventions, we will take all possible measures to protect our legal rights and interests."

'Security' defence viable under free trade deal

Andrew Godwin, an associate director of the University of Melbourne's Asian Law Centre, said there were substantial legal and treaty obstacles that would make it difficult for Huawei to take action against the Government.

Professor Godwin said while Australia's decision might be legal, that doesn't mean the broader bilateral trade relationship will emerge unscathed.

This concern was echoed by the Australia China Business Council's national CEO, Helen Sawczak.

"Bilateral trade is a two-way street. If we want Australian companies to prosper in the Chinese market, then we should also treat Chinese companies with respect and transparency when they operate in the Australian market," she told the ABC.

"While business remains positive about the opportunities which this important economic relationship offers, it can be challenging to conduct business when the political relationship is strained."

Huawei's prospects in Australia?

However, telecommunications analyst David Kennedy from Ovum said he did not expect Huawei to take any steps "that would compromise their position in the market".

The Government's decision this week may ban Huawei from participating in the 5G network, causing a setback for future plans on Australian shores, but the company's interests in 4G and enterprise technologies will remain unaffected.

"They need to ensure there isn't mission creep [a shift in intentions] in the way that this ban actually might expand," Mr Kennedy said.

"There's still a lot of 4G investment and development happening in Australia over the next few years and they would want to have a role in that market."